cost efficient fund administrator needed

Discussion in 'Professional Trading' started by emk662, Jul 17, 2012.

  1. emk662


    My friend in China is trying to start a hedge fund registered in BVI. The fund will trade USA markets. The seed money is small, probably under $400K. Therefore a low cost fund administrator is needed. He read an article (attached) that small administration firms only charges as low as $750, but he cannot find any in reality. Can someone recommend one? Thanks.
  2. Why start a fund with only 400K? Offshore (and in BVI particularly) you just need to set up a management company. Pool funds, investment club, managed accounts, friends and family all fly down there.
  3. emk662


    He is not quite sure what is the best way to start. He will set up a management company also in BVI, then operate in China. That is because it is still a gray area to run a private fund without government approval. Not to mention that capital outflow is quite restricted. Maybe setting up a fund formally will attract more serious capital down the road. What are those "Pool funds, investment club, managed accounts, friends and family"? Do those have legal status? Thanks.

  4. clerk


    Your article quotes $750/month. You should not have any difficulty finding an admin @ $9k/year + $1k start-up. Your friend needs to figure out what services he really needs, and really is willing to pay for; and to forgo extraneous services that jack up the cost. Which of these services does he really need?

    Process subscriptions and redemptions
    Calculate partner-level T+1 NAV's vs. monthly or even quarterly
    Multiple fund custodians
    Keeping accounting books/ledgers
    Keeping full entity statutory books & records
    Custody (i.e. pool operator) vs 2nd signer vs no custody

    With a 400k fund, your friend really ought to keep it simple and lean. For example, your friend could use just a single entity, serve as both the entity's manager & advisor, draft his own offering documents, process his own paperwork, and hire book-keepers do to quarterly batch-processing.

    Your average administrator (and certainly not one who charges low rates) is not going to hold your friends hands with fund/MgtCo structuring and offering+subscription documents. He is going to put that all together himself - so he might as well put it all together in a way that keeps his costs down.

    Also, finding competent service providers on the islands doesn't come cheap because of the lack of competition, low supply, and high demand. Your friend would probably save money by using first-world providers in competitive marketplaces. He should investigate if a US fund vehicle would be cheaper than a BVI or Caymanian entity. China & the United States do not have a Tax Information Exchange Agreement in place (China has TIEA's with Argentina, Bermuda, Bahamas). For your investors, using a US tax-transparent vehicles has the same practical result as using a tax-haven tax-free corporate vehicle. And if you are going to open a brokerage account at Interactive Brokers, you are going to end up disclosing your investors identities anyway, so the non-public tax-returns are not a big deal.